Nucor earnings beat by $0.08, revenue fell short of estimates
Tuesday, ON Semiconductor (NASDAQ:ON) faced a reduction in price target from Benchmark, with analysts lowering the figure to $50 from the previous $60, while maintaining a Buy rating on the stock. Benchmark’s analyst cited ON Semiconductor’s first quarter performance and outlook as reasons for the adjustment. The company’s revenue exceeded guidance by approximately $46 million, with earnings surpassing expectations by $0.05, attributed to reduced operating expenses as a result of last quarter’s restructuring. According to InvestingPro data, the stock appears undervalued despite a 47% decline over the past six months, with 13 analysts recently revising their earnings estimates upward.
The company’s guidance for the coming quarter remains relatively flat, which suggests that the end markets are beginning to stabilize after a prolonged period of decline. Over the past six quarters, sales have decreased by 34% from the peak levels of the second quarter of 2023. This quarter, the standout segment was the Advanced Solutions Group (ASG), while the Power Solutions Group (PSG) contributed the lowest percentage of revenue since around 2016, accounting for 45%. The company maintains strong financial health with a current ratio of 4.95 and operates with a moderate debt-to-equity ratio of 0.42.
Despite these positive signs, ON Semiconductor continues to experience gross margin pressure. The second quarter’s gross margin is projected to be around 37.5% at the midpoint, which indicates a quarter-over-quarter decline of 250 basis points. This decrease is partly due to underutilization and partly due to pricing actions taken to defend or increase market share.
The analyst noted that the pricing issues appear to be strategic and confined to specific product areas or customers, rather than being widespread. There was no clear indication of when revenue might return to the 85% threshold, but management highlighted that underutilization currently impacts gross margins by approximately 900 basis points. This suggests potential for improvement in margins once demand increases.
In other recent news, ON Semiconductor reported impressive financial results for Q1 2025, exceeding Wall Street expectations with earnings per share of $0.55 and revenue of $1.45 billion. Despite these positive results, the company faced a notable 26% decline in automotive revenue, which impacted overall performance. In response, ON Semiconductor plans to increase share buybacks to 100% of free cash flow in 2025. UBS raised its price target for ON Semiconductor to $45, citing the company’s cost-saving measures and potential benefits from new Silicon Carbide projects with Chinese electric vehicle manufacturers. However, UBS maintained a Neutral rating due to anticipated slower recovery in earnings per share. Meanwhile, Truist Securities reduced its price target to $43, maintaining a Hold rating, reflecting concerns over tariff uncertainties and weaker booking strength. BofA Securities also cut its price target to $46 but maintained a Buy rating, highlighting ON Semiconductor’s strong free cash flow and low-leveraged balance sheet as attractive factors for investors.
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